Now the arrival of a Bitcoin (BTC) exchange fund, or a spot Exchange Traded Fund (ETF) seems to be becoming a reality, the crypto world is eagerly counting down until the moment of approval. Expectations are high, but Arthur Hayes, co-founder and former CEO of crypto exchange BitMEX, is issuing a major warning.
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ETFs could ”completely destroy” Bitcoin
In a blog post from December 22 explains Hayes, also a prominent Bitcoin bullexpresses that he sees an additional problem with a successful launch of Bitcoin spot ETFs.
He explains that BTC has value because “it moves” on the blockchain. Spot Bitcoin ETFs work counter to this value proposition, according to Hayes, as it would slow the flow of coins. Spot Bitcoin ETFs were created to “suck up assets” and “store them in a metaphorical vault,” Hayes writes.
According to him, a major ETF success could lead to a drying up of the number of transactions on the blockchain. He said the following about this:
“BlackRock, the largest fund manager in the world, is playing the game of accumulation. They suck up assets, put them in a vault, issue a tradable share, and then collect a management fee for their “hard” work. They are not using the assets they hold for customers, which is a problem for Bitcoin if we take that to an extreme in the future.”
The end result, according to Hayes, is that miners will turn off their machines “because they can no longer pay for the energy to run them.” In this dark scenario, Bitcoin could be “completely destroyed” in his view. After all, miners are a crucial link within the ecosystem that secures the network with large amounts of computing power.
Too little BTC reward for miners
For adding a new transaction block to the chain, miners receive both a block reward as all transaction costs paid. Every 4 years the block reward is halved with the Bitcoin halving and by the year 2140 it will have fallen to 0.
From that year onwards, transaction costs will be crucial for miners to survive. According to Hayes, this could pose a problem when institutional parties manage huge amounts of bitcoins through ETFs.
To what extent a future like this will actually unfold is of course a big question mark. For now, the crypto world is optimistically awaiting a decision from the US Securities and Exchange Commission (SEC), which according to analysts is likely to approve multiple applications on January 8, 9 or 10.
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2023-12-25 12:33:03
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